Virtual Reality Devices Finally Become a Reality

But Technology Faces Challenges in Reaching its True Potential.

This is the year that virtual reality (VR) has started to go from virtual to game reality. With the release of a number of headsets like Facebook’s Oculus Rift, Sony’s PlayStation VR and HTC Vive in recent months, VR may finally live up to its long-promised potential in 2016.

While there are many types of VR systems, all of the devices persuade users they have entered a new reality. Headset wearers view life-sized, three-dimensional images that change as they move around or make head and eye movements. The technology differs from augmented reality devices – which have been much discussed with this year’s success of Pokémon Go – that maintain users’ connections with the real world.

This year’s launch of several brand-name VR products from major players has raised hopes that the technology will reach far beyond the early-adopter market.

Deloitte Global predicts that virtual reality (VR) will have its first $1 billion year in 2016, with about $700 million in hardware sales and the remainder from content, primarily video games.

But 2016 may only be the start. A report by Tractica, for example, forecasts that the combined revenue for head-mounted displays, VR accessories, and VR content will increase from $108.8 million in 2014 to $21.8 billion worldwide by 2020, with a compound annual growth rate of 142%. Seventy per cent of sales in the VR ecosystem come from hardware companies that develop head-mounted displays, control devices and tracking devices, while the remaining 30% of sales are of software.

Tractica notes that getting users to experience VR technology and truly understand its potential, remains a challenge, but the emergence of low-cost VR solutions is helping.

VR makers are now pitched in a high stakes battle to become the next Apple of the industry. Google has high hopes for its about-to-launch Daydream VR , a platform that will combine Android smart phones, headsets and new controller hardware. The company’s goal is to design an ecosystem that combines hardware, software, viewers, controllers and experiences in concert.

Meanwhile, Sony’s PlayStation VR, priced at $399, is sold out at retailers around the world. Sales of headsets from Oculus – which Facebook bought in 2014 for $2 billion – and HTC, however, are said to be modest.

Still, analysts say the fairly-low costs for VR headsets will help drive adoption and that demand will be fueled by the 1.2 billion gamers worldwide. Best Buy, for one, is staking a bet that devices like the PlayStation VR will become a hit among U.S. consumers this holiday season. The retailer is uniquely positioned to allow consumers to try out the technology.

To expand the VR market, a number of applications are foreseen for VR. Last year, Australian airline Qantas began providing VR headsets with movies to its first class passengers on select routes. The NBA has become the first major U.S. sport league to release virtual reality footage and NASCAR and the NHL are testing the technology. Software company JauntVR has captured footage that can help users stand next to Paul McCartney while in concert.

But as brands compete to offer the best VR headsets, they face similar challenges, Wall Street analysts say, including the need for better graphics and display resolution. To reach mass adoption, VR will need to prove it is more than a gaming accessory and improve its unwieldy ergonomics to make it more of a social experience.